In the
United States Court of Appeals
For the Seventh Circuit
____________________
No. 13‐2435
JAN DOMANUS, ET AL.,
Plaintiffs‐Appellees,
v.
DEREK LEWICKI, ADAM SWIECH, AND RICHARD SWIECH,
Defendants‐Appellants.
____________________
Appeal from the United States District Court for the
Northern District of Illinois, Eastern Division.
No. 08 C 4922 — Elaine E. Bucklo, Judge.
____________________
ARGUED DECEMBER 4, 2013 — DECIDED FEBRUARY 4, 2014
____________________
Before FLAUM, EASTERBROOK, and TINDER, Circuit Judges.
FLAUM, Circuit Judge. Adam Swiech, Richard Swiech, and
Derek Lewicki received a host of discovery sanctions in the
district court. These sanctions eventually led to the ultimate
penalty, when they ended up on the wrong end of a
$413,000,000 default judgment. In this appeal, the defendants
claim that the district judge abused her discretion both in
levying this harsh sanction and in calculating the damages
they owe. We disagree, and affirm.
2 No. 13‐2435
I. Background
Krakow Business Park sp. z o.o. (“KBP”) is a Polish entity
that was formed to develop, appropriately enough, a busi‐
ness park near Krakow, Poland. Plaintiffs Jan Domanus and
Andrew Kozlowski are shareholders in KBP, and defendants
Adam Swiech, his brother Richard Swiech, and Derek
Lewicki are all either current or former shareholders. The
plaintiffs filed suit1 against the Swiech brothers and Lewicki
in 2008. The plaintiffs also named in the suit several other
individuals and entities; default judgment was not entered
against them, and that litigation is still pending in the dis‐
trict court.2 From here on out, we will use “defendants” to
refer only to Richard and Adam Swiech and Lewicki. The
plaintiffs alleged a fraudulent scheme to loot the company,
and sought relief under the civil provisions of RICO, 18
U.S.C. §§ 1962(a)–(d). They also brought supplemental state
claims for fraud, conversion, breach of fiduciary duty, tor‐
tious interference with prospective business advantage, civil
conspiracy, violation of the Illinois Uniform Fraudulent
Transfer Act, 740 ILCS § 160/1 et seq., and for an accounting.
Specifically, the plaintiffs contended that the defendants
caused KBP to pay out millions of dollars to the defendants
for services never performed, and that the defendants stole
cash and property from the company. The defendants alleg‐
1 Domanus and Kozlowski filed suit on their own behalf and deriva‐
tively as shareholders of KBP and several KBP subsidiaries.
2
These individuals and entities are Katarzyna Szubert‐Lewicki,
Bozena Sanecka‐Swiech, Spectrum, Ltd., Orchard Meadows, LLC, Lake
Ridge Townhomes Corp., Lake Ridge, LLC, Polcon Construction Corp.,
Protorius, Ltd., Saxelby Enterprises, Ltd., and ADR Enterprises, Inc.
No. 13‐2435 3
edly used some of this money to build subdivisions in sub‐
urban Chicago. They put other funds back into KBP as “capi‐
tal contributions” in exchange for newly‐issued stock to Ad‐
am Swiech. This new stock diluted the plaintiffs’ ownership
shares and made Swiech the majority shareholder. Finally,
the defendants allegedly sabotaged the sale of KBP’s shares
to a real estate firm called Orco, and then tried to squeeze
the plaintiffs out of the company.
Polish authorities investigated the Swiechs and Lewicki
for crimes related to KBP and brought charges against them.
Based on the record, that prosecution was seemingly ongo‐
ing at the time of default.
Towards the suit’s beginning, the defendants unsuccess‐
fully moved to dismiss all claims, and the plaintiffs success‐
fully obtained a preliminary injunction against Adam
Swiech. The injunction forbade Swiech from executing sev‐
eral KBP‐related transactions. The case was then referred to
a magistrate judge for discovery. The defendants’ abuse of
the discovery process resulted in several sanctions rulings by
the magistrate, which we will discuss in detail below. But in
short, when the plaintiffs objected to the magistrate’s rela‐
tively lenient decisions, the district judge found the sanc‐
tions too light and imposed more onerous ones—including
contempt and an order barring the defendants from using
certain evidence.
On October 22, 2012, the plaintiffs moved for default
judgment before the district judge. The defendants had not
produced the documents that the contempt order required
of them. They instead alleged that it was impossible for them
to do so. The district judge was unpersuaded, concluding
that the defendants had made hardly any effort, let alone ex‐
4 No. 13‐2435
tensive effort, to produce the documents they had been or‐
dered to produce. The district judge granted default judg‐
ment against the Swiechs and Lewicki on January 11, 2013,
denied defendants’ motion for a stay pending resolution of
the case against the non‐defaulting defendants, and entered
final judgment awarding the damages on May 31.
II. Discussion
The defendants appeal the district judge’s imposition of
harsher discovery sanctions and her grant of default judg‐
ment. The default judgment is what the defendants really
care about. But they think they can show that the judgment
was unreasonable by showing that the district judge’s over‐
ruling of the magistrate judge’s orders and imposition of
harsher sanctions—violations of which drove the eventual
entry of default—were an abuse of discretion. The defend‐
ants also appeal the district judge’s calculation of damages,
her denial of their request for a damages hearing, and her
denial of a stay pending resolution of the claims against the
non‐defaulting defendants. We provide the necessary facts
as we go.
A. The discovery sanctions
Section 636 of the Federal Magistrates Act and Federal
Rule of Civil Procedure 72(a) govern district court review of
nondispositive magistrate judge decisions. 28 U.S.C.
§ 636(b)(1)(A) (providing that a district judge “may recon‐
sider any pretrial matter … where it has been shown that the
magistrate judge’s order is clearly erroneous or contrary to
law”); Fed. R. Civ. P. 72(a) (“The district judge … must con‐
sider timely objections and modify or set aside any part of
the order that is clearly erroneous or is contrary to law.”) In
No. 13‐2435 5
short, the district judge reviews magistrate‐judge discovery
decisions for clear error. See Weeks v. Samsung Heavy Indus.
Co., 126 F.3d 926, 943 (7th Cir. 1997).
We, in turn, review all of the district judge’s discovery‐
related sanction decisions only for an abuse of discretion.
Dotson v. Bravo, 321 F.3d 663, 666 (7th Cir. 2003). “We uphold
any exercise of the district court’s discretion that could be
considered reasonable, even if we might have resolved the
question differently.” Maynard v. Nygren, 332 F.3d 462, 467
(7th Cir. 2003) (citation omitted). The defendants cannot
demonstrate that the district court abused that discretion
here.
i. Bank records
In June of 2010, the plaintiffs sent interrogatories to the
defendants to acquire the defendants’ bank account records.
The defendants failed to comply, prompting the magistrate
to grant the plaintiffs a motion to compel. The defendants
then produced some records from a handful of accounts. But
these records revealed other accounts also controlled by the
defendants, which they had not disclosed. The plaintiffs
identified eighteen such undisclosed accounts through sub‐
poenas and a tip from Polish prosecutors. They were unable
to get records for two of the accounts, which were housed in
non‐U.S. banks.
1. The Julius Baer account
Adam Swiech owned one of these accounts, a Bank Julius
Baer account in Switzerland. This was the account flagged
for the plaintiffs by Polish prosecutors, who provided doc‐
uments showing money flowing into the account from KBP
accounts. Through a subpoena, the plaintiffs obtained wire
6 No. 13‐2435
transfer records from American accounts held by Lewicki
that showed additional transfers into the Julius Baer account.
Swiech did not turn over any records, and he refused to
acknowledge he owned the account (he claimed it belonged
to his minor son). By the end of 2011, Swiech had produced
nothing, despite multiple discovery requests, and claimed
the records were not within his control.
The magistrate was unconvinced by Swiech’s story and
ordered production of the records by January 6, 2012.
Throughout January and February of 2012, Swiech made a
few halfhearted efforts to obtain the records. On January 6,
the defendants’ counsel sent the plaintiffs a copy of a letter
that Swiech supposedly sent to Julius Baer. The letter did
not, however, request any specific records or provide an ac‐
count number or other identifying information. The magis‐
trate judge then instructed Swiech about the form that a
proper records request should take—i.e., that the letter
should include sufficient identifying information. Swiech
sent another letter on January 16, but again failed to include
an account number. The defendants’ lawyer apparently
called Julius Baer on February 2, and was told that an ac‐
countholder could acquire information by appearing in per‐
son or by requesting it in writing. Still, Swiech produced
nothing. Finally, at the end of February, the plaintiffs moved
for sanctions and sought to have Swiech held in contempt.
The magistrate found Swiech’s behavior sanctionable,
but declined to hold him in contempt. Instead, she sanc‐
tioned Swiech with a potential adverse jury instruction: if
Swiech failed to produce the records by the close of discov‐
ery, the jury would be instructed that the records would
have been adverse to him.
No. 13‐2435 7
The plaintiffs objected to this ruling in the district court,
and the district judge found the sanction unreasonably leni‐
ent in light of Swiech’s repeated discovery violations. In an
August 13, 2012 order, the district judge held Swiech in con‐
tempt, citing a need to leave “escalating sanctions … on the
table in order to ensure compliance with court orders.” She
noted that the magistrate’s adverse jury instruction gave
Swiech the option of continued delay by allowing him to
produce the documents at the close of the discovery—when
they would be less useful to the plaintiffs—while still avoid‐
ing the sanction. Swiech could also opt not to produce the
records at all—say, if they turned out to be very damaging—
and live with the adverse instruction.
Swiech argues that the magistrate judge did not clearly
err and that it was therefore an abuse of discretion for the
district court to hold him in contempt. We disagree. Swiech’s
efforts to comply with the magistrate’s production orders
were minimal, at best. He did not disclose the account’s ex‐
istence and then denied owning it. Once he got around to
requesting records, he sent patently inadequate letters to Jul‐
ius Baer that did not comply with the magistrate judge’s or‐
ders. Indeed, both judges agreed that Swiech had disobeyed
several explicit production orders.
Given that, the district judge’s decision to stiffen the pen‐
alty was sensible. She noted that the records at issue were
central to the case (the plaintiffs suspected that the Julius
Baer account was a clearinghouse for money being looted
from KBP), and that an adverse jury instruction was insuffi‐
cient impetus for Swiech to comply. She discussed Swiech’s
history of discovery violations and explained her reasoning
for imposing tougher sanctions. Moreover, contempt was a
8 No. 13‐2435
reasonable sanction. District courts must support a contempt
finding with clear and convincing evidence that the court’s
clear order has been violated. See Autotech Techs. LP v. Inte‐
gral Research & Dev. Corp., 499 F.3d 737, 751 (7th Cir. 2007).
Swiech’s overtly noncompliant behavior in response to the
magistrate’s production orders certainly qualifies. Thus, the
district judge’s decision to hold Swiech in contempt was not
an abuse of discretion.
2. The HSBC account
The second controversial account was a Polish HSBC ac‐
count belonging to Lewicki. Lewicki first claimed the ac‐
count was irrelevant to the dispute. He then produced an
affidavit saying that he was having difficulty getting the rec‐
ords from HSBC. After more back and forth between
Lewicki and the magistrate, Lewicki produced only an
online transaction log for the account, which contained no
details about the wire transfers the plaintiffs were interested
in.
The plaintiffs moved to sanction Lewicki at the same
time as they did Adam Swiech. Lewicki told the magistrate
judge that despite his best efforts, he could do no better than
the transaction log. Lewicki’s evidence of these efforts con‐
sisted of one letter that he sent the bank; a declaration claim‐
ing that he called the bank and was told wire transfer rec‐
ords were unavailable and that the bank would not confirm
their unavailability in writing; and a flier from HSBC Poland
indicating that it would be winding down its banking ser‐
vices in Poland. The magistrate judge had also ordered the
defendants’ attorney to contact HSBC himself, but he did not
do so. Counsel instead submitted a declaration stating that
No. 13‐2435 9
he “truly and honestly believed” that document production
was complete.
Nonetheless, the magistrate judge declined to hold
Lewicki in contempt or impose sanctions. The magistrate
found Lewicki’s efforts more laudable than Adam Swiech’s,
and concluded that the former had complied with the dis‐
covery orders. The district judge disagreed in her August 13
order, however. The district judge found Lewicki incredible
and his declaration about his phone call with HSBC insuffi‐
cient to account for the absence of wire transfer records. Not‐
ing Lewicki’s history of discovery violations and dishonesty,
the court held him in contempt as well.
This order was a dramatic shift from the magistrate
judge’s response, but that does not mean it was an abuse of
discretion. Lewicki’s single, apparently unanswered letter to
HSBC does not demonstrate a diligent effort at compliance.
Moreover, Lewicki’s proffered flier from HSBC, which indi‐
cated a winding‐down of retail banking in Poland, did not
suggest that record availability would be compromised in
any way.3
The district judge’s decision to hold Lewicki in contempt
was based largely on her finding that Lewicki was not credi‐
ble. This finding, in turn, was informed by Lewicki’s pattern
of discovery violations and recalcitrance. We are in no posi‐
tion to question the court’s credibility finding—especially
3 The flier indicated that HSBC Poland’s Internet banking services
would cease after December 31, 2011, but that paper statements would
still be available by mail. The flier did not contain any information on the
availability of other types of records, such as the wire transfer confirma‐
tions sought by the plaintiffs.
10 No. 13‐2435
where, as here, the court’s determination appears reasona‐
ble.
The defendants argue that the district court should not
have discredited Lewicki’s declaration stating that he called
the bank and was told wire transfer records were unavaila‐
ble and that the bank could not provide written confirma‐
tion. There was no evidence in the record to rebut the decla‐
ration’s assertions, the defendants contend, and under the
circumstances, Lewicki could do no more than attest to the
records being unavailable. But this objection does not ex‐
plain why the district judge was obligated to credit
Lewicki’s declaration in the first place. This is especially true
because the same declaration contained Lewicki’s incredible
story about his destruction of Richard Swiech’s computer
hard drive (more on that below), which cast doubt on the
reliability of his entire statement. Cf. United States v. Terry,
572 F.3d 430, 434 (7th Cir. 2009) (affording “special defer‐
ence” to the district court’s credibility determinations stem‐
ming from testimony at a suppression hearing because of the
court’s superior ability to evaluate credibility); Xiao v.
Mukasey, 547 F.3d 712, 717 (7th Cir. 2008) (noting, in the im‐
migration context, that a single significant discrepancy was
“enough to find petitioners’ entire testimony not credible”).
Moreover, as the district judge noted, the wire transfer rec‐
ords that the plaintiffs sought were commonly available; at
the very least, it should have been possible for Lewicki to
provide confirmation from HSBC if the documents were in
fact unavailable. Lewicki’s claim to the contrary was emi‐
nently suspect. In sum, the district judge’s credibility deter‐
mination was not an abuse of discretion.
No. 13‐2435 11
Once the district judge found Lewicki’s testimony incred‐
ible, it followed that the magistrate judge had clearly erred
by not imposing sanctions. It also meant that there was clear
and convincing evidence to support a contempt finding, be‐
cause what remained was Lewicki’s unexcused failure to
produce documents after multiple production orders. Thus,
the district court’s imposition of harsher sanctions was no
abuse of discretion.
ii. The hard drive
On May 20, 2011, then‐counsel for the defendants sent
the plaintiffs over 1,800 pages of documents taken from a
computer hard drive belonging to Richard Swiech. Counsel
told the plaintiffs that the documents had just become avail‐
able. The plaintiffs reviewed the files and suspected that the
production was incomplete, as the documents contained
suspiciously few emails between the defendants. The de‐
fendants initially denied under‐producing, but they eventu‐
ally admitted that there were additional documents on the
hard drive. The magistrate gave the defendants sixty days to
review and produce the rest of the documents. None were
forthcoming. The defendants eventually produced twenty‐
one CD‐ROM discs near the end of 2011, but the plaintiffs
still suspected that the files were incomplete and asked the
magistrate to order a forensic inspection of the hard drive on
January 12, 2012. Two weeks later, the defendants admitted
that the hard drive had been destroyed. Richard Swiech had
apparently given it to Lewicki, who said that he had taken
the drive apart and given it to his children to play with.
The plaintiffs moved for sanctions in February 2012. In
their motion they asked the magistrate judge to bar the de‐
fendants from using any of the documents taken from the
12 No. 13‐2435
hard drive and to order Richard Swiech and Lewicki to ob‐
tain the missing emails from their email service providers.
The defendants responded with the revelation that the hard
drive had allegedly crashed in 2009 and was then destroyed
in early 2010. They claimed that Lewicki had used some
“special software program” to recover some of the files—the
twenty‐one CD‐ROMs that the defendants had managed to
produce—before he destroyed the hard drive. This story did
not hold up, however, as the twenty‐one discs contained
numerous documents from 2010 and 2011—and yet the de‐
fendants claimed that the hard drive was destroyed in 2009.
The magistrate judge found that the defendants had vio‐
lated their duty to preserve evidence, and noted that “much
of the Defendants’ explanation for discarding the hard drive
is incredible.” But the magistrate limited sanctions to a jury
instruction on spoliation: she found the defendants’ behavior
was grossly negligent, but not in bad faith.
The plaintiffs again objected to the district court, and the
district judge again agreed with them. The district judge
pointed out the inconsistencies in the defendants’ story. For
instance, the defendants’ lawyer initially claimed in late 2011
that she believed the hard drive was in Illinois and in work‐
ing order. Later, when the plaintiffs were seeking to have the
hard drive scanned, the defendants changed their story and
said that the drive had crashed back in 2009, never to be re‐
paired. This was inconsistent both with the defendants’ 2011
claim that the documents “had just become available” and
with the documentary evidence they produced—which, if
taken at face value, showed that the computer actually was
No. 13‐2435 13
repaired in 2009.4 Moreover, the hard drive had been dis‐
cussed at numerous status conferences, but the defendants
had never before indicated that it had been destroyed two
years earlier. Taking all this in, the district judge reached the
“inescapable conclusion that Defendants destroyed evidence
and lied about it.” As such, she reasoned that a spoliation
instruction was insufficiently harsh. Instead, the district
judge forbade the defendants’ use of any of the documents
taken from the hard drive and ordered the defendants to ob‐
tain emails from their email service providers.
The district judge’s bad faith finding was reasonable. The
defendants’ stories regarding the destruction of the comput‐
er were far from consistent—both the district judge and the
magistrate judge agreed on that point. The defendants can
only contend that the magistrate’s spoliation sanction was a
sufficiently harsh response, and that the district judge
abused her discretion by overturning it. But this argument
again fails to account for the district court’s discretion in this
area. The district judge certainly could have upheld the mag‐
istrate judge’s decision, but that does not mean it was unrea‐
4 The evidence produced in support of this 2009 repair is itself hard
to decipher. Richard Swiech produced an Apple Store invoice from May
18, 2009, which contained an estimate for a repair service to be per‐
formed on Swiech’s hard drive. Swiech also produced an Apple Store
invoice dated February 22, 2012 (which was in the middle of the discov‐
ery dispute); this invoice included a handwritten note indicating that the
repair had been done on May 19, 2009. If the note on the second invoice
is genuine—the invoice does contain the same repair number as the May
18 receipt—then it undercuts Swiech’s claim that his computer was not
repaired in 2009. Moreover, Swiech’s story is further undermined by the
fact that some of the documents produced from the hard drive were
from 2010 and 2011, which was after the hard drive’s supposed demise.
14 No. 13‐2435
sonable for her to conclude otherwise. Once the district court
concluded that bad faith had driven the defendants’ failure
to produce the hard drive, it was permissible to infer that the
missing evidence would in fact have been harmful to the de‐
fendants. See Crabtree v. Nat’l Steel Corp., 261 F.3d 715, 721
(7th Cir. 2001). Given that, it was no abuse of discretion to
grant a harsher sanction barring the use of any documents
from the hard drive and ordering Richard Swiech and
Lewicki to seek all of their emails from their email providers.
Such a sanction appropriately mitigated the harm to the
plaintiffs as a result of the defendants’ wrongdoing.
iii. The defendants’ deposition‐related abuses
The abuses did not cease after the August 13 order. Addi‐
tional episodes, while not leading to sanctions, bolstered the
case for default. In May 2012, the plaintiffs’ attorneys first
contacted defendants’ counsel about deposing Adam Swiech
in Poland.5 The defendants delayed in scheduling the depo‐
sition, claiming that Swiech was having eye surgery in Au‐
gust 2012. Fact discovery ended on September 28, with an
exception for the deposition, which the parties agreed to
schedule for the week of October 15. But the defendants’ at‐
torney rebuffed repeated efforts by plaintiffs’ counsel to
schedule the deposition. They indicated that Swiech’s doc‐
tors had restricted his activity. Yet Swiech had testified in a
Polish court for over two hours at the end of that same Au‐
gust, just days after his eye surgery was supposed to have
taken place.
5 Swiech was apparently forbidden from leaving Poland as the crim‐
inal investigation against him continued.
No. 13‐2435 15
On October 2, the defendants’ lawyer sent plaintiffs’
counsel an email claiming an inability to schedule the depo‐
sition until after Swiech’s October 7 doctor’s appointment.
They never reached out to the plaintiffs after this email, and
Swiech was never deposed.
Meanwhile, the defendants deposed plaintiff Domanus
on October 23. During his deposition, the defendants’ lawyer
showed Domanus what was purported to be Domanus’s
“amended” 2006 tax return. The document had not been
produced by either party during discovery, and Domanus
stated that he did not recognize it or authorize anyone to
prepare it. Upon further inquiry, the plaintiffs discovered
that the return had been prepared by the defendants’ ac‐
countant at Richard Swiech’s direction. The defendants ad‐
mitted this, but cryptically explained that the “return” was a
“demonstration exhibit.”6
B. The default judgment
This drumbeat of discovery abuse led the district judge to
default the defendants.
When the plaintiffs moved for a default judgment on Oc‐
tober 22, 2012, the defendants still had not complied with the
district judge’s August 13 sanctions order related to the bank
accounts and hard drive. Neither Adam Swiech nor Lewicki
had produced any more bank records. Swiech sent only one
additional letter to Julius Baer after the contempt order
against him, while Lewicki made no further efforts at all to
obtain wire transfer records from HSBC. Similarly, Lewicki
6 The record is not clear about what the defendants hoped to achieve
with this “amended” tax return.
16 No. 13‐2435
had made no effort to retrieve the missing emails. Richard
Swiech sought emails from two of his service providers
(each of which operated several of his email accounts), but
he admitted that he had not reached out to other providers
that operated separate accounts, which he had been ordered
to do. The two providers that Richard Swiech contacted al‐
legedly told him that they did not keep emails for more than
thirty days.
Notwithstanding these demonstrably lackluster attempts,
the defendants claimed that it was impossible for them to
comply with the discovery orders and that this impossibility
should excuse their continued failure to produce. The dis‐
trict judge was unconvinced, finding their efforts inadequate
to demonstrate impossibility.
The district judge also noted additional behavior sup‐
porting default. For one, she found Adam Swiech’s explana‐
tion for avoiding his deposition unpersuasive. The only cor‐
roboration he offered was his statement, which described a
surgery in March 2012 (not August), a hospital stay in July
and August, and “sick leave” he took from September 24 to
October 7. Swiech also submitted an untranslated document
written in Polish that purported to verify the sick leave. But
this evidence, even if accepted at face value, could not pro‐
vide any excuse for Swiech continuing to duck his deposi‐
tion after October 7.
As for Domanus’s “amended” tax return, the district
judge concluded that the defendants’ explanation that the
return was “demonstrative” was incredible, and that even if
the court accepted it, the defendants would have still com‐
mitted a discovery violation by not producing the return
ahead of time. Finally, the district court observed that nei‐
No. 13‐2435 17
ther Adam Swiech nor Lewicki paid their contempt fines or
the $39,749 in attorneys’ fees awarded by the magistrate
judge after the imposition of contempt sanctions. The court
further noted that the list of the discovery violations she dis‐
cussed was not exhaustive.
Default judgment is strong medicine for discovery abuse.
It is appropriate only where “there is a clear record of delay
or contumacious conduct,” Maynard, 332 F.3d at 467, where
“other less drastic sanctions have proven unavailing,” id., or
where a party displays “willfulness, bad faith, or fault,” In re
Thomas Consol. Indus., Inc., 456 F.3d 719, 724 (7th Cir. 2006).
Still, on review of a district court’s entry of default, we look
to more than just isolated incidents of abuse. “[W]e weigh
not only the straw that finally broke the camel’s back, but all
the straws that the recalcitrant party piled on over the course
of the lawsuit.” e360 Insight, Inc. v. Spamhaus Project, 658 F.3d
637, 643 (7th Cir. 2011). We review the district court’s grant
of default judgment only for an abuse of discretion. Dundee
Cement Co. v. Howard Pipe & Concrete Prods., Inc., 722 F.2d
1319, 1322 (7th Cir. 1983).
The defendants correctly argue that they cannot be sanc‐
tioned for failure to comply with discovery orders if compli‐
ance was impossible. See Societe Internationale Pour Participa‐
tions Industrielles et Commerciales, S.A. v. Rogers, 357 U.S. 197,
210–12 (1958). They claim that the district judge held them to
too high a standard for demonstrating impossibility—in her
opinion granting the default judgment, she described impos‐
sibility as an “exacting legal standard, which requires exten‐
sive efforts at compliance undertaken in good faith.” The de‐
fendants seize on the use of the word “exacting” in advanc‐
ing this argument.
18 No. 13‐2435
The problem for the defendants is that there is no dispute
that to establish impossibility, one must have made diligent
efforts. See United States v. Conces, 507 F.3d 1028, 1043 (6th
Cir. 2007) (party must show “categorically and in detail” that
it took “all reasonable steps within its power to comply with
the court’s order” (quoting Glover v. Johnson, 934 F.2d 703,
708 (6th Cir. 1991))); United States v. Santee Sioux Tribe, 254
F.3d 728, 736 (8th Cir. 2001) (party must demonstrate it
“made in good faith all reasonable efforts to comply”). The
defendants bear the burden of showing that compliance was
impossible. Santee Sioux Tribe, 254 F.3d at 736. The defend‐
ants even seem to agree that good faith, extensive efforts are
required. Their objection is therefore semantic—they seize
upon the district court’s use of the word “exacting,” despite
the fact that the court was endorsing the same case that pro‐
vided the defendants’ preferred “good faith” approach. See
Rogers, 357 U.S. at 209. There is no evidence that the district
court was applying a more rigorous standard than it should
have, regardless of whether it referenced an “exacting”
standard or not.
We find that the district judge’s conclusion that the de‐
fendants’ efforts were neither extensive nor in good faith
was entirely reasonable. The defendants made, at most, to‐
ken efforts to comply with the August 13 contempt order. In
the case of Lewicki, there was no effort at all. Their other be‐
havior during discovery bolstered the case for default. For
one, Adam Swiech’s failure to sit for, or even schedule, his
deposition smacked of discovery‐dodging. Defendants’ pro‐
duction of a conjured “amended” tax return during plaintiff
Domanus’s deposition was also suspicious. The defendants
said that the document was “demonstrative,” in an effort to
explain why it was not produced during discovery. But the
No. 13‐2435 19
plaintiffs cast the document in a more sinister light, suggest‐
ing that it was prepared as part of a scheme to trip up Do‐
manus at his deposition. Even if the defendants’ story is
true, the district judge still found that the document should
have been produced ahead of time.
Taken together, these discovery abuses form a mosaic
that convincingly shows both a “clear record of delay or con‐
tumacious conduct,” and “willfulness, bad faith, or fault.”
Maynard, 332 F.3d at 462. Moreover, the district judge was
clear that her list of abuses was not exhaustive. She also em‐
phasized her adherence to our directive that she consider the
defendants’ discovery conduct as a whole, and not focus
solely on “the straw that broke the camel’s back.” e360 In‐
sight, 658 F.3d at 643. Thus, the district judge’s decision to
grant the default judgment was warranted and not an abuse
of discretion.
C. The damages calculation
Judgment secured, the plaintiffs proposed a three‐step
method for calculating their damages, and offered expert
testimony in favor of their theory. The expert first measured
the portion of KBP ownership lost as a result of the defend‐
ants’ diluting the plaintiffs’ stake in the company. She
termed this amount the plaintiffs’ “adjusted KBP ownership
percentage”—i.e., what share of the company they would
have owned absent the defendants’ misdeeds. The expert
then multiplied this figure by the price a real‐estate firm
called Orco had offered to purchase all of KBP’s shares to
yield the plaintiffs’ gross damages. Finally, the expert sub‐
tracted the actual value of the plaintiffs’ KBP shares to calcu‐
late their net damages.
20 No. 13‐2435
Fixing KBP’s present value (from which the plaintiffs’
share value was derived) was tricky, because the defendants
did not turn over some of the relevant company documents.
Thus, the plaintiffs’ expert relied on the 2009 offer of another
business—Apollo‐Rida Poland sp. z o.o.—to buy all of KBP’s
shares. Finally, because the default judgment had estab‐
lished liability under RICO, the damages were trebled, for a
total of just over $413,000,000.
The defendants raised no objection to the plaintiffs’ use
of “adjusted ownership percentages” as a baseline to meas‐
ure their damages, and did not question the qualifications of
the plaintiffs’ expert. Instead, the defendants objected to the
use of the Apollo offer to fix KBP’s present value and to the
certainty of their claimed losses from the Orco deal. The de‐
fendants did not offer a damages expert or theory of their
own. They moved for an evidentiary hearing to establish
damages, but their motion was denied. The district judge
acknowledged that the plaintiffs’ theory was perhaps specu‐
lative, but adopted it anyway, both because the defendants’
had put forth no alternative and because she found it was
their obstructionist behavior that made business records
hard to come by.
We review for an abuse of discretion both the district
court’s damages award and its decision about the damages
hearing. See BCS Servs., Inc. v. Heartwood 88, LLC, 637 F.3d
750, 759 (7th Cir. 2011) (noting that plaintiffs have a relaxed
burden of proof and broad latitude in quantifying damages);
Lewis v. City of Chicago Police Dep’t, 590 F.3d 427, 440 (7th Cir.
2009) (review of evidentiary matters is for abuse of discre‐
tion only). We do not disturb a damages award accompany‐
ing a default judgment unless it is plainly excessive. Wehrs v.
No. 13‐2435 21
Wells, 688 F.3d 886, 892 (7th Cir. 2012). That said, while a de‐
fault judgment conclusively establishes liability, the victor
must still prove up damages. Any allegations in the com‐
plaint relating to liability are considered true, but allegations
going to damages are not. Id. But our decisions allow “broad
latitude” in quantifying damages, “especially when the de‐
fendant’s own conduct impedes quantification … [—e]ven
speculation has its place in estimating damages.” BCS Servs.,
637 F.3d at 759. As in any damages calculation, the amount
sought must “naturally flow from the injuries pleaded.”
Wehrs, 688 F.3d at 893.
The defendants raise a multitude of arguments attacking
the damages award. However, their claims really boil down
to this: the damages were not sufficiently certain for the dis‐
trict court to calculate them without holding a hearing. The
defendants challenge the certainty of the “adjusted owner‐
ship percentages,” the accuracy and certainty of the Orco of‐
fer used to calculate the gross loss amount, and the reliabil‐
ity of using the Apollo offer to calculate KBP’s present value.
Because the defendants did not challenge the plaintiffs’
adjusted ownership computations in the district court, they
have forfeited their right to do so here. See, e.g., Hicks v.
Avery Drei, LLC, 654 F.3d 739, 744 (7th Cir. 2011). We there‐
fore review only for plain error, but the defendants could
not prevail under an abuse‐of‐discretion standard, either.
Once the defendants were found liable for diluting the stock,
the adjusted ownership percentage could be calculated with
simple arithmetic.
The defendants did raise complaints about the Orco offer
below, but there is nothing to suggest that the district court
erred on this front. The defendants contend that Orco’s offer
22 No. 13‐2435
was too high because it did not take into account KBP’s con‐
siderable debt. But an Orco official, who was deposed in this
case, made it clear that Orco was to assume KBP’s debts in
the deal, meaning that KBP’s debt obligations were built into
the proposed purchase price. The defendants also claim that
because the Orco deal was not final, it was insufficiently def‐
inite to support the damages award; Orco could have backed
out, leaving the plaintiffs unharmed by the defendants’ con‐
duct. But this contention again ignores the testimony of the
Orco official, who avowed that the deal would have gone
forward as planned if the defendants had not scuttled it. The
defendants’ blocking the deal was what gave rise to their li‐
ability—in other words, through the default judgment, the
plaintiffs conclusively established that the deal would have
gone off without a hitch but for the defendants. Thus, the
plaintiffs have properly proven their gross losses from the
Orco deal.
As for the Apollo offer, the plaintiffs admit that it was
not the best way to value the company. The offer was four
years old, nonbinding, and subject to a slew of conditions.
And the plaintiffs’ expert acknowledged that a discounted
cash‐flow analysis would have been the best way to ascer‐
tain then‐present value. But the documents needed to per‐
form the preferred analysis were unavailable—thanks to the
defendants—and the expert thought that the Apollo offer
was a sensible alternative. The district judge reasonably
found this methodology permissible, especially because the
defendants had withheld documents that might have aided
in a more accurate valuation. There was no abuse of discre‐
tion in adopting any of the inputs in the plaintiffs’ damages
formula.
No. 13‐2435 23
Nor did the district court abuse its discretion in denying
the defendants a damages hearing. The defendants argue
that a hearing was necessary to permit them to question the
author of the Apollo offer. They also complain about the of‐
fer being four years old. But what the defendants don’t dis‐
pute—that the Apollo offer was genuine—is key. The Apollo
offer was a reasonable way to value the company in the cir‐
cumstances, and it was a definite figure. The defendants did
not submit a damages expert or put forth an alternative
damages theory of their own, though they presumably pos‐
sessed sufficient information to construct one. See BCS Servs.,
637 F.3d at 759. The district court had figures in hand. In
these circumstances it was no abuse of discretion to decline
to hold a damages hearing. See Dundee, 722 F.2d at 1323 (not‐
ing that a damages hearing is unnecessary when “the
amount claimed is liquidated or capable of ascertainment
from definite figures contained in the documentary evidence
or in detailed affidavits”).
D. The denial of the defendants’ motion to stay
Lastly, the defendants claim that the district court’s dam‐
ages determination should have been stayed until the plain‐
tiffs’ claims against the non‐defaulting defendants were re‐
solved. We disagree. Though we have in the past prohibited
district courts from holding a damages hearing against a de‐
faulting defendant when the same claim remains pending
against non‐defaulting defendants, this rule comes from
concerns of judicial economy and inconsistent damage
awards. In re Uranium Antitrust Litig., 617 F.2d 1248, 1262
(7th Cir. 1980). There is no concern for inconsistent awards
here. The plaintiffs have committed—both in open court and
in their briefs—to dismiss all claims against the non‐
24 No. 13‐2435
defaulting defendants if the judgment against the Swiechs
and Lewicki is affirmed. Accordingly, they will be judicially
estopped from abandoning their firm commitment once we
do so. See, e.g., Grochocinski v. Mayer Brown Rowe & Maw LLP,
719 F.3d 785, 795 (7th Cir. 2013). This is not the case that
Uranium Antitrust sought to avoid, and it was therefore no
abuse of discretion for the district court to deny the defend‐
ants’ motion for a stay.
III. Conclusion
The district court was within its discretion to impose
harsh sanctions, to grant a default judgment against the de‐
fendants, to calculate the damages as it did, and to decline to
hold a damages hearing. We AFFIRM.